Most People Miscalculate Their Car Loan—and Lose Tens of Thousands Without Realising It**
Ever wondered why your salary seems to vanish before the month ends?
You’re not alone.
For most people, the biggest money leak isn’t food, shopping, or lifestyle — it’s their car loan.
Many Malaysians end up struggling financially not because they earn too little, but because they bought the wrong car, at the wrong price, with the wrong formula.
Today, let me show you a simple but powerful method to make sure your car never destroys your finances.
The Golden Rule: Buy a Car You Can Truly Afford
One of the easiest rules to remember is this:
Your car price should not exceed your annual salary.
Example:
If your monthly salary is RM5,000, your annual income is:
RM5,000 × 12 = RM60,000
👉 That means your car price should be below RM60,000.
Simple, right?
But if you want to be more disciplined and financially safe, there’s an even better method.
The 20–5–15 Formula (Most People Ignore This 😮)
This formula is slightly more advanced — but it can save you years of financial stress.
What does 20–5–15 mean?
🔹 20% Down Payment
Put at least 20% upfront.
🔹 5-Year Loan Maximum
Do not stretch your loan beyond 5 years.
🔹 15% of Net Salary
Your monthly car installment must not exceed 15% of your take-home pay.
Real-Life Example (Case Study)
Let’s say you want to buy a car priced at RM60,000.
Step 1: Down Payment (20%)
20% of RM60,000 = RM12,000
Step 2: Loan Amount
RM60,000 − RM12,000 = RM48,000
Step 3: Interest Rate
Assume a 2.5% fixed interest rate.
Annual interest:
2.5% × RM48,000 = RM1,200
Total interest for 5 years:
RM1,200 × 5 = RM6,000
Step 4: Total Payment to Bank
RM48,000 + RM6,000 = RM54,000
Step 5: Monthly Installment
RM54,000 ÷ 5 ÷ 12 = RM900 per month
**Now the Most Important Question 💡
Can You Actually Afford RM900 per Month?**
Using the 15% rule:
RM900 ÷ 15% = RM6,000
👉 This means you should earn at least RM6,000 net salary to afford this car safely.
If you earn RM6,000 or more — congratulations.
You’re buying a car within your financial capability.
Why Most People Stay Broke (Hard Truth)
Car installments are only the beginning.
You still have:
Insurance
Road tax
Maintenance
Parking
Toll
Repairs
Petrol or charging costs
These “small” expenses pile up silently — and that’s why many people end up:
Running out of money
Cutting meals
Waiting desperately for payday
Not because they’re careless — but because they ignored the formula.
Personal Experience (What Actually Works)
I personally own three cars.
One is fully paid off.
The other two are well within my budget.
Only one car I bought brand new — the rest were second-hand.
Here’s a smart insight:
European cars (BMW, Mercedes, Audi) drop in value very fast → better to buy second-hand
Japanese cars (Honda, Toyota, Mazda) hold value better → buying new can make sense if you can afford it
Smart money decisions are not about showing off — they’re about sustainability.
Final Advice (Save This 💬)
If you follow either:
✅ The Annual Salary Rule, or
✅ The 20–5–15 Formula,
you’ll avoid financial burnout and actually enjoy your life — not just survive till payday.
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Comment if you have questions
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